The performance of broader markets
is another cause of concern, as close to 300 stocks in the BSE 500 index are currently below their 200-DMA. Nearly half of these stocks are trading at more than 15 per cent below their 200-DMA.
“We are still in the early phase of market correction. The sell-off could intensify if there are any unexpected outcomes from state elections. The problem with mid-cap stocks has been expensive valuations without any meaningful recovery in earnings. Investors should prefer blue-chips over mid-cap and small-cap stocks as they offer stable earnings and are currently available at attractive valuations,” said G Chokkalingam, founder, Equinomics Research.
Half of the BSE 500 companies have fallen more than 25 per cent from their peaks, underscoring the pain in the market after the recent sell-off. The BSE Midcap and Smallcap indices have declined 14 per cent from their January peaks, underperforming the benchmark Sensex, which has declined 9.3 per cent. The fall, however, comes after four years of sharp outperformance.
Indian stocks could see price downgrades if the correction prolongs, analysts said. Brokerages have revised the price targets of 400 BSE-500 companies. Even 28 companies from the benchmark Sensex have seen downward price revision in the last one month, data showed.
have witnessed severe downward bias during March. Analysts said the government's decision to reintroduce long-term capital gains (LTCG) tax has also prompted some of the selling from the investors.
“The current period has been a difficult phase for Indian markets.
There has been selling due to the reintroduction of LTCG tax. There is also some redemption pressure on the domestic mutual funds. However, the long-term play looks positive,” said Gaurang Shah, head investment strategist, Geojit Financial Services.